02 May 2016 Nestlé and R&R to create Froneri, an ice cream and frozen food joint venture
In its latest attempt to adapt to a changing and more competitive market, global food giant Nestlé has finalised its joint venture with Britain’s R&R Ice Cream to sell ice cream and frozen food in more than 20 countries.
The agreement caps months of talks between Nestle and R&R’s owner, PAI Partners, first reported by Reuters in October. The venture follows a portfolio review aimed at improving Nestle’s performance, which has been weakened by slowing emerging markets, a change in consumer tastes toward fresher foods, and heightened competition.
The 50/50 joint venture, which will be called Froneri, will have sales of around CHF2.7-bn (£1,9bn) in over 20 countries employing about 15 000 people.
It will be based in the UK where it plans to eventually list on the London Stock Exchange, and will combine Nestlé and R&R’s ice cream activities in Europe, the Middle East, Argentina, Australia, Brazil, the Philippines and South Africa.
Nestlé’s ice cream brands include Dreyer’s, Haagen-Daazs and Movenpick, while R&R’s include Cadbury, Oreo and Daim.
The companies have worked together over the past 14 years, initially in the UK and Ireland as well as, more recently, in Australia and South Africa (in March last year), where R&R licences Nestlé brands.
Froneri will also include Nestlé’s European frozen food business (excluding pizza and retail frozen food in Italy), as well as its chilled dairy business in the Philippines.
Negotiations for the agreement were announced last October. Froneri will combine Nestlé’s brand experience and “out-of-home” distribution with R&R’s competitive manufacturing model.
Nestlé’s milk and ice cream sales grew at 1.7 per cent last year, less than half the rate of the company as a whole during the year.
Ibrahim Najafi, R&R’s chief executive, will head Froneri, while Nestlé’s Luis Cantarell, who runs the food behemoths businesses in Europe, the Middle East and North Africa, will be chairman.
Nestlé chief executive Paul Bulcke said: “This is an exciting growth opportunity in a dynamic category. Froneri will capitalise on complementary strengths and innovation expertise, combining Nestlé’s strong and successful brands and experience in ‘out-of-home’ distribution with R&R’s competitive manufacturing model and significant presence in retail.”
Nestlé had divested more than 25 business units in the past four years. Rivals Unilever and Procter & Gamble have also sold underperforming assets as slowing global growth has put more focus on profits.
Nestlé, which is aiming to become a more health-focused company, will keep its stronger ice cream businesses in Asia and most of the Americas, and its position as the world’s second-largest ice cream company, behind Unilever.
Financial terms were not disclosed, but the venture will be a close No. 3 player.
Mass-market ice cream has come under pressure, as consumers look for healthier or more artisanal options, opening up the market to smaller players.
The partners declined to comment on the possibility of job cuts, saying the initial focus would be on growing sales, such as by filling gaps in the respective distribution networks.
Following integration, the venture will also be open to mergers and acquisitions.
Nestlé has other joint ventures, with US cereal maker General Mills and one with French dairy firm Lactalis.
The deal is expected to close around the end of the year, subject to employee consultations and regulatory approval.
Source: Reuters
Related reading: